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article imageFord Canada CEO raises concerns about TPP with Ottawa

By Ken Hanly     Feb 14, 2016 in Business
Ottawa - Dianne Craig, the Chief Executive Officer of Ford Canada says that when she meets government officials later this month, she will raise the risks posed to the Canadian automotive sector by the Trans-Pacific Partnership (TPP).
Craig said she will also discuss the need to increase subsidies in order to attract more investment in the Canadian auto sector. Ontario has been losing jobs in the sector to Mexico and the southern United States where labor costs are lower.
Ray Tanguay, an automotive adviser to both the federal and Ontario government said that the federal innovation fund should be restructured. While the fund is intended to offer incentives for investment in the sector, Tanguay would like the money to be given out in the form of grants. He did not call for more money to be in the fund, saying that it was up to federal and Ontario officials to determine the economic benefits to be gained from providing more incentives.
Speaking at the Canadian International AutoShow in Toronto, Craig said: “Right now, the way the loans are treated by the Canadian government, they’re not competitive, because in other jurisdictions, they’re not taxable.” Craig also said that although she supports free trade, the TPP was structured in an unfair way. The deal will hurt Canadian manufacturing and in particular the auto sector.
Last October, Unifor, the union representing Canadian workers at the largest three auto makers, claimed the deal will lose us an estimated 20,000 jobs due to the elimination of tariffs and the reduction of content rules for both vehicles and auto parts.Over the next five years the 6.1 percent tariff on imported passenger vehicles will be eliminated, a move that will lower the cost of Japanese vehicles for Canadian consumers. The deal requires that 45 percent of imported vehicles must have content from TPP countries while 40 to 45 percent is required for auto parts. Under NAFTA rules the content requirement are much higher at 62.5 percent on vehicles and 60 percent on parts. Jim Stanford, an economist for Unifor, said that Canadian parts makers would be encouraged to move their facilities to TPP member states where labor is cheaper. Stanford said: “There’s no possible way to paint this deal as benefitting the auto industry. There’s no possible way to say that new exports to Japan and Malaysia and Vietnam will somehow offset both the inflow of imports from those places, and more importantly, the potential relocation of a big chunk of our supply chain.” Not everyone was so negative about the implications of the deal.
Flavio Volpe, president of the Automotive Parts Manufacturers Associatiion said that his area that employs about 81,000 people is about evenly split between companies that benefit from the deal and those that must struggle to adapt. Volpe said: " On one hand, prospects to supply vehicle assembly in foreign markets will open for large Canadian suppliers with multinational footprints and access to mobile capital.On the other hand, small and medium-sized suppliers to Canada’s vehicle assembly supply chain will face new competitive pressure from large, multinational firms from TPP countries and further abroad.”
The text of the TPP was finally released just a day after Trudeau took over as prime minister. Harper refused to release the text before the election. Mark Nantais, president of the Canadian Vehicle Manufacturer's Association, which employs more than 20,000 Canadians, said that he was unhappy that the United States will agree to eliminate the tariff on Japanese vehicles over a period of up to 30 years while Canada does the same thing in just five years. While the deal gives Canada access to more foreign markets including Japan, it also benefits low-wage suppliers of auto parts in many Asian countries. The content terms were even skimpier than Harper had said. Engine parts and truck frames and metal roof panels require only TPP content of 35 percent. Volpe noted that 26 Canadian parts companies make stamped metal components and another 18 make engine parts. They were flagged by his group to be protected but were obviously not.
The new Liberal government is making no promises about renegotiating the TPP. Eleven other countries are involved in the deal. Instead, the International Trade Minister Chrystia Freeland suggests that Canadians should review the accord and send their feedback. The TPP is 6,000 pages long.
More about transpacific partnership, Dianne Craig, Ford Canada
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